Fidelity Money Market Fund suggestions?

[Third Son]

Bogleheads: I have $500K sitting in my core position (from a lump sum pension) in Fidelity in a tax advantaged account that I would like to keep in money market environment for the next couple of years. I am in retirement and currently have a 35/65 AA with Fidelity in two funds. When looking into the money market options, I noticed that the typical fund has an ER of 0.42 to 0.55. Am I missing something here? Should I maybe looking into alternatives? I currently own FSKAX (total market index fund) and FXNAX (US bond index fund) at Fidelity.

[retired@50]

As far as money market funds go, the yield is the more telling statistic than the expense ratio since all yields are net of expenses.

I'm afraid you're in for a long wait if you hope to leave the money at Fidelity for two years in a money market fund.

SPAXX is currently paying .01% yield.

Most folks in your position would go to the trouble of finding an online savings account (or two if necessary) (Ally, Marcus, Capital One) that is currently paying around 1%.

Regards,

[Third Son]

As far as money market funds go, the yield is the more telling statistic than the expense ratio since all yields are net of expenses.

I'm afraid you're in for a long wait if you hope to leave the money at Fidelity for two years in a money market fund.

SPAXX is currently paying .01% yield.

Most folks in your position would go to the trouble of finding an online savings account (or two if necessary) (Ally, Marcus, Capital One) that is currently paying around 1%.

Regards,

I need to keep the money tax advantaged for the distant future. Wouldn't moving the money to an online savings account require me to take the money out of tax advantaged status?

[retired@50]

As far as money market funds go, the yield is the more telling statistic than the expense ratio since all yields are net of expenses.

I'm afraid you're in for a long wait if you hope to leave the money at Fidelity for two years in a money market fund.

SPAXX is currently paying .01% yield.

Most folks in your position would go to the trouble of finding an online savings account (or two if necessary) (Ally, Marcus, Capital One) that is currently paying around 1%.

Regards,

I need to keep the money tax advantaged for a while. Wouldn't moving the money to an online savings account require me to take the money out of tax advantaged status?

It would if you intend to move to an online savings account.

If your tax advantaged account is a brokerage type account that allows trading, you might be able to use some of the money to purchase a CD in the secondary market. If you do have trading capability in the account, maybe place a call to the Fidelity help desk and see if they can walk you though some of the basics of buying CDs inside your particular account type.

Regards,

[Third Son]

As far as money market funds go, the yield is the more telling statistic than the expense ratio since all yields are net of expenses.

I'm afraid you're in for a long wait if you hope to leave the money at Fidelity for two years in a money market fund.

SPAXX is currently paying .01% yield.

Most folks in your position would go to the trouble of finding an online savings account (or two if necessary) (Ally, Marcus, Capital One) that is currently paying around 1%.

Regards,

I need to keep the money tax advantaged for a while. Wouldn't moving the money to an online savings account require me to take the money out of tax advantaged status?

It would if you intend to move to an online savings account.

If your tax advantaged account is a brokerage type account that allows trading, you might be able to use some of the money to purchase a CD in the secondary market. If you do have trading capability in the account, maybe place a call to the Fidelity help desk and see if they can walk you though some of the basics of buying CDs inside your particular account type.

Regards,

Thanks for the reply. This money is in a tax deferred IRA. I should have mentioned that before.

[anon_investor]

As far as money market funds go, the yield is the more telling statistic than the expense ratio since all yields are net of expenses.

I'm afraid you're in for a long wait if you hope to leave the money at Fidelity for two years in a money market fund.

SPAXX is currently paying .01% yield.

Most folks in your position would go to the trouble of finding an online savings account (or two if necessary) (Ally, Marcus, Capital One) that is currently paying around 1%.

Regards,

I need to keep the money tax advantaged for a while. Wouldn't moving the money to an online savings account require me to take the money out of tax advantaged status?

It would if you intend to move to an online savings account.

If your tax advantaged account is a brokerage type account that allows trading, you might be able to use some of the money to purchase a CD in the secondary market. If you do have trading capability in the account, maybe place a call to the Fidelity help desk and see if they can walk you though some of the basics of buying CDs inside your particular account type.

Regards,

Thanks for the reply. This money is in a tax deferred IRA. I should have mentioned that before.

If you do not mind moving the money Ally Bank offers IRAs with FDIC insured high yield savings (currently 1.1%) and CDs with even higher rates.

[retired@50]

As far as money market funds go, the yield is the more telling statistic than the expense ratio since all yields are net of expenses.

I'm afraid you're in for a long wait if you hope to leave the money at Fidelity for two years in a money market fund.

SPAXX is currently paying .01% yield.

Most folks in your position would go to the trouble of finding an online savings account (or two if necessary) (Ally, Marcus, Capital One) that is currently paying around 1%.

Regards,

I need to keep the money tax advantaged for a while. Wouldn't moving the money to an online savings account require me to take the money out of tax advantaged status?

It would if you intend to move to an online savings account.

If your tax advantaged account is a brokerage type account that allows trading, you might be able to use some of the money to purchase a CD in the secondary market. If you do have trading capability in the account, maybe place a call to the Fidelity help desk and see if they can walk you though some of the basics of buying CDs inside your particular account type.

Regards,

Thanks for the reply. This money is in a tax deferred IRA. I should have mentioned that before.

I'm not familiar with Fidelity, but I know that at Vanguard, it's possible to have a tax-deferred IRA that still allows "brokerage style trading". I guess it just depends on how your account is set up at Fidelity.

Regards,

[rkuklinski]

Ally has an IRA online savings account (https://www.ally.com/bank/ira/online-savings-account/). I am unable to locate a similar offering from Marcus. Perhaps other internet banks offer a similar IRA account as well.

[EnjoyIt]

Ally is currently running a brokerage promotion as well $1200 for $500k deposit. I’m not sure but maybe they will honor that deal for an IRA.

[Third Son]

I was hoping for a few more ideas. Thanks for those who responded.

[UpperNwGuy]

I was hoping for a few more ideas. Thanks for those who responded.

A few more ideas? You're asking the impossible. There are no more alternatives than the ideas that have been suggested to you. This is a bad time in the US economy to hold money in any form of "cash."

[corn18]

FZDXX is the best FIDO MM and it isn't great compared to an allied account. But that is what I use for short term savings in my brokerage account.

[tony_roach]

FZDXX is a higher yield money market with a 100k minimum deposit. Yield is still low relative to a few months ago.

[informal guide]

An ultra-safe choice is to buy individual treasury securities. - 3 mo is 0.152%, 6 mos. is 0 .175%, 1 yr is 0.168 as of this afternoon. Brokered CDs through Fidelity will give you similar to slightly more.

I believe Fidelity will let you set up auto reinvest at maturity so you are not out of the market.

Another option that has some interest rate risk but no credit risk is the Fidelity Short Term Treasury Bond Index - -current 30 day yield net of 0.03% expenses is 0.22% with a 2.66 year duration.

[sycamore]

Given that your IRA is a brokerage account, you could invest in some ultra-short and short-term bond funds.

There are several very short term options: NEAR, BIL, MINT, GSY, ICSH.

Some Vanguard short-term bond ETFs VGSH, VCSH, BSV have a duration between 2 - 3 years so a bit more duration risk.

Many of them dropped more than one might have expected back in March. So there's that.

They're not paying all that much more than some money market funds, so you'll have to investigate to see if their extra yield is worth the effort to you.

[Third Son]

I was hoping for a few more ideas. Thanks for those who responded.

A few more ideas? You're asking the impossible. There are no more alternatives than the ideas that have been suggested to you. This is a bad time in the US economy to hold money in any form of "cash."

Not necessarily true if you read the posts after yours. But thanks for chiming in.

[IowaFarmBoy]

Fidelity offers fixed annuities that can be used in a tax-advantaged account like an IRA. They currently have one from MassMutual that offers 1.85% for a jumbo (>$100k) for a 3 year commitment. These work kind of like a cd- you commit the money for 3 years and they guarantee an interest rate. The downside is that your money is locked up for 3 years with a 7% penalty for early withdrawal although they do let you pull out 10%/year and have some provisions for nursing home care, death, etc. You have no FDIC insurance and are relying on the financial strength of the insurance company.

In today's environment, that is a great interest rate but you need to be aware of the loss of liquidity and the reliance on insurance company's financial position.

[drzzzzz]

FZDXX is a higher yield money market with a 100k minimum deposit. Yield is still low relative to a few months ago.

FZDXX has a lower minimum deposit in an IRA, I think it is 10K

[JoMoney]

As far as money market funds go, the yield is the more telling statistic than the expense ratio since all yields are net of expenses.

I'm afraid you're in for a long wait if you hope to leave the money at Fidelity for two years in a money market fund.

SPAXX is currently paying .01% yield.

Most folks in your position would go to the trouble of finding an online savings account (or two if necessary) (Ally, Marcus, Capital One) that is currently paying around 1%.

Regards,

I need to keep the money tax advantaged for a while. Wouldn't moving the money to an online savings account require me to take the money out of tax advantaged status?

It would if you intend to move to an online savings account.

If your tax advantaged account is a brokerage type account that allows trading, you might be able to use some of the money to purchase a CD in the secondary market. If you do have trading capability in the account, maybe place a call to the Fidelity help desk and see if they can walk you though some of the basics of buying CDs inside your particular account type.

Regards,

Thanks for the reply. This money is in a tax deferred IRA. I should have mentioned that before.

I'm not familiar with Fidelity, but I know that at Vanguard, it's possible to have a tax-deferred IRA that still allows "brokerage style trading". I guess it just depends on how your account is set up at Fidelity.

Regards,

You can buy brokered CD's in a Fidelity IRA. You just got to the "Trade" option, choose "Fixed Income", "Search Inventory", and then under the CD's tab you can view either 'secondary' or 'new issue' CD's.
OP needs to realized though that while marketable CD's are usually FDIC insured, and will return principal at maturity, they can fluctuate in their current market value.

[missedit]

I just looked up FZDXX according to summary page
Exp Ratio (gross): 0.37%
Exp Ratio (Net): 0.3%
7 day yield (as of 5/31/20): 0.17%
the yield now is likely much lower.
Does this mean this has a net negative yield (after expenses?)

[nix4me]

Gotta take more risk to get any return.
Ultra short bond funds such as:
JPST
VUBFX
ICSH
GST
SHV

There are many...

[retired@50]

Does this mean this has a net negative yield (after expenses?)

No.
Published yields are net of expenses.
In other words, no addition or subtraction is needed to know the yield.

Regards,

[Aaabbbccc]

Not a MM but FCONX has 1% yields and < 1 yr wtd maturity

[travelogue]

Gotta take more risk to get any return.
Ultra short bond funds such as:
JPST
VUBFX
ICSH
GST
SHV

There are many...

This was going to be my suggestion. I split a part of my eFund, which I hold at Vanguard, into JPST and ISCH. They are subject to some volatility (but so far not too much) during extreme market conditions, but JPST currently has a 30 day SEC yield of 1.35% compared with VMFXX at a 7 day SEC yield of 0.12%.